Friday, November 21, 2008

Market Rallies back on Geithner Nomination

Hello All!

Its a sad day when it takes an Obama nomination for Sec'y of Treasury to rally the markets. That's exactly what happened today folks. The news continues to be grim but it didn't matter today. You know those bulls! They love to rally the market on hope!

I said yesterday that we were due for a bounce but geez!. The fact that the volatility is this high is frightening folks. The credit and stock markets are both extremely unstable. The move in gold today in my opinion is a result of the instability of the markets. I think many are tired of this roller coaster, and are loking to find an alternative investment. Gold is a logical choice. Check out the big move today.

There was more gloom and doom today from a research standpoint.

The Goldman Sachs economic report was interesting today:

"(Reuters) – Goldman Sachs on Friday lowered its U.S. growth forecast citing a fiscal policy stagnation, record increase in unemployment and a sharp decline in profits, deepening and extending the expected recession.

Goldman said it now expects U.S. GDP to fall 5 percent in the current quarter, with unemployment rate reaching 9 percent in the fourth quarter of 2009.

It also forecast the 10-year yield to fall to 2.75 percent by the end of the first quarter of 2009, as compared to previously estimated 3.5 percent.

"The combination of weaker real activity and slower inflation means that profits of U.S. companies will fall even more sharply than we had previously expected," Goldman said in a note to clients.

Goldman now sees economic profits falling 25 percent in 2009 on an annual average basis, the biggest drop since 1938. It had earlier expected a fall of 20 percent."

Quick Take:

Isn't that just Rosy?

I am amazed at how the market can rally 6% when research reports like this are released. Whats even more ridiculous about this rally is Geithner took all kinds of heat for letting Lehman fail. He might not be the hero that everyone on Wall St. hopes that he is.

Obama's appointments so far hardly represent "change". In fact its appearing more and more that he represents "more of the same". Geithner is good buddies with Paulson and is just another pigmen from Wall St. Obama could have really sent a strong message by going out on a a limb and given the spot to Volker for a year or two in an effort to clean things up. I realize the guy is a dinosaur, but he knows how to clean up messes! He doesn't need to serve a full term in order to do so.

Hillary Clinton appears to be a lock for Secretary of State. Change? HAH! what a joke. I thought the Clinton era was coming to an end? I guess not.

Remember folks, Obama is being pumped up to be the savior of the world. He is supposed to be the next messiah!

The reality here is he is a one term senator that is being thrown into the biggest economic crisis in history. There is no way he will be able to fulfill these unrealistic expectations. Obama is in way over his head, and this economic collapse will take him down and probably define his legacy. None of this will be his fault of course. In fact, he seems to be a pretty normal, nice, moderate guy.

Lets hope he is a fast learner and is able to get his hands around this. Good luck Obama! Your going to need it! I do seriously wish him the best. We need a great leader badly to get us through this unfortunate time in history. Unfortunately IMO, its too late to clean this mess up, and the market is going to fall like a rock when they realize this.

Bottom Line:

There is not much else to report today. There was no good news or catalyst for the rally. It will fail like all of the others. The question here is this: Is this the beginning of the Obama rally or just another failed pump. I am on the fence here as the holidays approach. Its wait and see time for me and new trades.

Attempting to short this move could be very profitable, but its very risky.

There are potential shoe drops everywhere that could move the market south. Citigroup seems to be hanging on by a thread and could be dissolved over the weekend:

"Nov. 21 (Bloomberg) -- Citigroup Inc. will probably get rescued by the U.S. government after a crisis in confidence erased half its stock-market value in three days, investors and analysts said.

Citigroup has more than $2 trillion of assets, dwarfing companies such as American International Group Inc. that got U.S. support this year. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke may favor a rescue to avoid the chaotic aftermath of Lehman Brothers Holdings Inc.’s bankruptcy in September."

If Citi fails, its probably good for 1000-1500 drop in the markets. My guess is the Treasury will force a merger here or backstop them. this is in the "too big to fail" category according to the Fed.

I am going to focus more on gold and the miners right now. I own some GDX as you know, and I am encouraged by the breakout move in gold today. I get the feeling that investors are tired of the whipsaws seen daily in the markets. They want stability and safety as evidenced by the big move into treasuries this week.

I think gold may be the perfect alternative to this roller coaster market that's starting to make everyone nauseated.

Stay Tuned!


Growler said...

Have a good weekend, Jeff.

Jeff said...

You too Growler!

What a week eh?

This volatility is wearing me out. Glad its the weekend and I am looking forward to the holiday next week.


johndaniels said...


in a word: Desperation!

or maybe...anticipatory short covering.

this rally only insures things get worse down the road.

but who really knows.

Jeff said...

JD agreed

Its a crazy market!

Anonymous said...

Jeff. Wish there were more comments like on mish's blag, but your rock. I wanted to thank you very much for your awesome day to day analysis. I look forward to your posting and they are very inciteful. I've been trying to get a sense of how everything really comes together. Thank you again.

Jeff said...


Thank a lot!

I am glad you are enjoying the blog! Feedback is always appreciated.

I will do my best to continue and try to make sense of whats going on out there in the markets.

Growler said...


"What a week eh?

This volatility is wearing me out. Glad its the weekend and I am looking forward to the holiday next week."

Rightly or wrongly the only way I've been able to stay profitable is by trading intra-day patterns. Otherwise, the volatility would have me running for the hills.

Jeff said...


I hear ya. I have been mainly shorting the bear rallies.

I have scalped a few long trades but I get in and out quick.

There are too many potential shoe drops for me to hang out on the long side very long.

HOpe you have a profitable week.